Hot Investing Trend Off-Limits to US Investors

One of the hottest investing trends in the world today is digital currencies. With Bitcoin quadrupling in price this year, demand for digital currencies is greater than ever. More and more new cryptocurrency projects are starting up, with their creators trying to launch funds to get the projects off the ground. They’re doing so by offering tokens through initial coin offerings (ICOs), a cryptocurrency equivalent to initial public offerings (IPOs). Because of the uncertainty surrounding those token sales, they remain off-limits to US investors.

The US Securities and Exchange Commission (SEC) recently ruled that the tokens issued in ICOs are a type of security and thus are subject to SEC regulation. In order to get around that regulation, companies engaging in ICOs are freezing out US investors. They will require investors to certify both that they are not US citizens or permanent residents and that they are not purchasing the tokens on behalf of a US citizen or entity. Many of the companies also block US-based IP addresses, and any financial institutions involved in the ICOs will not allow US investors to participate.

Because of the huge increase in the value of many cryptocurrencies this year, there has been a strong demand among investors to get involved in ICOs. Looking back on the history of Bitcoin, which has gone from being worth fractions of a penny to over $4,000 within just a few years, the thought of getting in on the next big cryptocurrency has stimulated a huge amount of demand from investors.

Stories of early Bitcoin adopters becoming multimillionaires is undoubtedly spurring much of the demand. One company, Bancor, set a record last month by raising $153 million in funding in less than three hours, something that would have been impossible for companies in any other sector to do so quickly.

Whether any of these companies offering ICOs will actually bring a desirable product or service to market remains to be seen. It could be that ICOs are a great way to raise money for companies and a lousy way to invest in cryptocurrencies. If that’s the case then US investors may be better off for not being able to take part in ICOs.

Hot Investing Trend Off-Limits to US Investors was last modified: August 25th, 2017 by Paul-Martin Foss